This paper aims to provide an exploratory study on the fate of the two municipal councils in Hong Kong, namely the Urban Council and the Regional Council. It attempts to explain the rationale behind the Government's decision to implement change, and uses the framework of Cortell and Peterson (1999) to explain the process of institutional change in Hong Kong. The change is generated as a result of a combination of health crisis and change of regime. The triggers are the series of outbreaks of cholera, and Avian Flu crisis in 1997. A new strain of virus, previously known to attack poultry, was found attacking humans in Hong Kong. Six people died out of 19 reported cases, and more than 1.3 millions of chickens were slaughtered over the territories within 5 days' time. The import of poultry was temporarily banned from the mainland in early 1998 for a period over some two months. The epidemic was seen threatening the world. The Government seized the opportunity for change. Again the spear of the Government was pointed at axing the two municipal councils. Merger was not the government's aim, this would create a power centre and an expensive bureaucracy, which was capable of challenging its power and the institutional design of the representative government of the territory by the two superpowers, the People's Republic of China and the United Kingdom. The Basic Law expressly disallows the creation of district organizations as political bodies. The Government acted as the agent of change, and had the determination to implement change. Ultimately the two municipal councils were disbanded with the passing of the relevant legislation in the Legislative Council in December 1999. The academic and politicians accused the government's move a roll back of democracy, and the Government defended it as a problem solving exercise.